McCully’s oversell of changes to our foreign aid programme

May 8th, 2009

The belated release yesterday of the April 23 Cabinet papers on the changes to New Zealand’s aid programme suggest that Foreign Affairs Minister Murray McCully has been more mouth than trousers on this topic. Of late, McCully has been talking up a storm about the need for a culture change in our overseas aid programme – the core goal of which will now be economic development, rather than the eradication of poverty. What is still lacking is the rationale (beyond the pursuit of right wing ideological correctness) for change.

McCully has said he wants the semi-autonomous NZAID division to be folded back into the Ministry. Why? Well, as McCully has famously alleged, the aid division’s goal of poverty elimination, is akin to flying around aimlessly biffing money out of helicopters. He has variously described the poverty elimination goal as being ‘nebulous’, ‘lazy’ and ‘incoherent.’ (In fact, this goal of poverty elimination is perfectly in sync with the UN’s Millennium Goal of halving poverty by 2015, which this government and other UN member nations around the world have pledged to pursue, but never mind.)

So, what do we find in the Cabinet papers? Yes indeed, NZAID will lose the semi-autonomous status created by the Clark government in 2001 to provide the aid division with clarity of purpose and freedom from political meddling. However- and this is the surprise element – it will retain its name, its separate identity and budget allocation, plus its focus on gender, human rights and environmental factors in aid delivery, and plus its capacity to hire in the aid experts that it feels it needs to do its job. All of this will be retained unless and until the Secretary of Foreign Affairs explicitly decides otherwise.

Moreover, rather than discard the goal of poverty elimination, the New Zealand aid programme will continue to pursue the cause of poverty reduction. After all as the Cabinet Papers Annex says at one point in tones that are far more temperate than any McCully has used of late :

All Western donor countries currently have poverty alleviation/elimination at the core of their purpose statement (see annex 1); for New Zealand not to have it in its ODA goal in some form would be out of step with the current international consensus on international development. Australia has both poverty reduction and sustainable development as its core policy goals.

What the Cabinet papers do set in concrete is a focus on sustainable economic development. Yet interestingly, this re-focus is not because of any past failures in NZAID’s operations. Indeed Cabinet Minute 2 para (5:1) says that feedback from Ministers and stakeholders over the past four years “has been positive about ODA operations, but uneven about aspects of programme design and balance”. It continues by saying that “there are certain transaction costs to achieving positive results, which are heavily reliant on the commitment and personalities of the people involved in MFAT and NZAID, both in New Zealand and in international posts.”

This stuff about ‘transaction costs’ is somewhat hilarious bureaucratic shorthand for saying that while the system is working fairly well at the moment, it might not always do so – if NZAID employees and MFAT employees didn’t get along with each other in future as well as they have so far. It is a theoretical problem, only – and it reflects MFAT (and one imagines, McCully’s) concerns that the Johnnies and Janes in the aid division just might become too independent, and could be bypassing our diplomatic staff at overseas posts as they report straight back to home base. Thus, the need for hierarchical control. In microcosm, the paranoia reflected here indicates everything that is wrong about New Zealand’s preferred style of bureaucratic management.

Later in the year, the Cainet papers indicate, there will be a paper presented on the future direction of “NZ Inc” in both its internal and external aspects. It is unclear where all this will leave the aid programme’s current, OECD applauded methods of building up literacy and other capacity at the local level – but the Cabinet papers leave a bit more legroom for current practice than McCully has been signalling of late.

Hard-nosed economic indices will now be applied to the aid programme, as if they haven’t been in the past. In the wake of his hard hitting May 1st speech to the NZ Institute of International Affairs, McCully talked of using ‘objective’ measures such as tourism and trade figures, to measure the future effectiveness of our aid efforts. Well, good luck. Everyone wants to reduce poverty. Yet causal connections, and economic returns are often not short run matters, or all that easy to pinpoint.

The benefits of literacy for instance, may not crop up in next year’s balance sheet, or during the term of a political spin cycle. Also, if Samoa or Kiribati happen to improve their economic performance in years to come, it will be hard to prove conclusively that it was our aid effort that was the deal breaker that set them on the path to affluence. The difficulty of proving immediate and programme-specific results does not invalidate the programme. It simply calls for the evaluation process to be more subtle – and thankfully, it normally is.

Obviously, there is no good reason why programmes to reduce poverty should not also enhance economic development. Programmes that address illiteracy for instance are a necessary prelude to economic performance, the creation of trade and transport infrastructure, and the creation of a tax base for the provision of public services. When not paying lip service to their political masters, the drafters of the Cabinet papers recognise the dangers of pursuing aid programmes focussed on a level of economic development that will be of benefit mainly to the existing elites. From the Annex :

Poverty elimination as the focus can be seen as a ‘deficit model’ ie. addressing what’s missing/plugging the gaps, whereas an economic development and growth model can be seen as an ‘opportunity model’ ie addressing what’s possible, creating additionality. Neither focus is sufficient in itself: • Economic growth that is too narrow does not address the drag on society that poverty represents (the opportunity cost of poverty) and risks reinforcing elites at the expense of the poor. • Poverty alleviation, the focus from the 1990s until now, led to agreed global goals – the Millennium Development Goals – but far from satisfactory progress. For growth to be broad-based and inclusive, the will, capability and policy settings of the recipient government are essential.

Right. Overall, it is not surprising that McCully has sought to put some daylight between his abrasive speech on May 1st and the release of the Cabinet papers. On April 30, McCully had assured aid agencies that the Cabinet documentation would be released ASAP. The fact it has taken an entire week – a long time in politics, and in the media cycle – can be read as an indication of McCully’s reluctance to allow his speech be readily contrasted with Cabinet’s restraint, and its reluctance to throw the aid baby out with the ideological bathwater.

Still, there is no doubt that the ideological culture at NZAID is in for a shake-up. There will be changes in the sort of projects that are funded. Yet unless the criteria for selecting, administering and evaluating aid projects are totally swept aside – which seems unlikely – any attempts by the politicians and diplomats to use the aid programme as a slush fund for their own pet purposes would seem destined to fail. Unless the Minister intends to run NZAID as a personal fiefdom on a daily or weekly basis, the more flaky ideas will still need to run through the filter of how aid projects are professionally selected, managed and assessed.

That has been the main weakness of McCully’s ideological broadside against NZAID. In effect, he has implied that poverty elimination was an unrealistic goal dreamed up by a bunch of left wing ideologues who had managed to hi-jack the aid programme – and somehow hoodwinked the OECD, and the United Nations in the process. In reality, the current process is rigorous and entails not only a buy-in by host governments and communities in the Pacific, but by donor colleagues such as Australia as well – for whom we manage their aid programme to the Cook Islands.

Far from biffing money indiscriminately out of choppers, NZAID proceeds via what I would summarise – briefly – as five basic principles. Namely :

1. Ownership by the local communities and governments. This means not parachuting in with imposed solutions, but working on local capacity building

2. Alignment. This means working within nationally set priorities, local processes and systems.

3. Harmonisation This means ensuring that our aid contribution is not with clashing with or duplicating the efforts of international aid donors. As the Cabinet papers say : “ODA programmes will pursue concrete measurable results through programmes that are well co-ordinated with other donors, especially Australia, and closely aligned to partner country needs.”

4. Managing for results. This is the nitty gritty of value for inputs, the careful selection and sensitive management of the project in terms of local needs and priorities.

5. Having a proper exit strategy. This entails a good faith commitment to the host country, to ensure the aid programme is not abruptly changed or terminated. It also entails subsequent evaluation and analysis to judge the outcomes – which may be over generations, in a literacy programme – and adaptation of delivery accordingly, in future.

Essentially that is how the NZAID programme has proceeded. It has been rigorously reviewed and recognised internationally (by the likes of the OECD) for its professionalism, and for the worth of its outcomes. The Solomon Island base literacy programme has been a classic example. This has been an inter-generational effort operating from the grass roots, but positively linked to other needs in that society, from the bottom up.

It is unlikely that the government wants to junk that kind of approach entirely, if at all. It would be foolish to do so. Some of the things the Key government has recently diverted aid money into – ie, to subsidise Air New Zealand flights in the Pacific – would almost certainly fail McCully’s new test of sustainable economic development. After all, what will happen in a year when the subsidies currently being paid to Air NZ on some of its Pacific routes are due to expire ? Is the airline being encouraged in any way to become self sufficient on these routes, and if so how ?

To use McCully’s own terms, the airline seems to be getting a handout, not a hand-up – and one of the main beneficiaries stands to be a fish processing firm in Samoa ( run by an expat Kiwi ) that needs to get its produce to market in Los Angeles. These are the sort of subsidies that benefit the relatively few.

Similarly, aid projects that stand to benefit large scale tourism services owned offshore would offer few benefits – even of the notorious ‘trickle down’ variety – to the people and communities of the Pacific, and would do little to enhance political stability in the region. If anything, a narrow focus on high-end economic development would be more likely to create further resentment, and feed a neo-colonial perception of New Zealand that is already quite problematic for us.

Finally, we simply cannot outbid the foreign policy competition. Their cheque books are bigger than ours. Keep in mind the principles of ‘alignment’ and ‘harmonisation’ mentioned above. Essentially, we shouldn’t be supporting aid projects that wastefully seek to compete with other aid donors. For the past couple of years, aid from China has been pouring into Fiji in the kind of infra-structural projects ( bridges, low cost housing, schools) that we can’t ( and probably shouldn’t) be seeking to duplicate or compete with. NZAID is one of the more cost effective tools of niche diplomacy that we have – precisely because it hasn’t been tainted by our often ham-fisted diplomacy in the Pacific. Long may its relative independence continue, and thrive.Public transport pays off !

Just a footnote, but 538.com’s superstar statistician Nate Silver
has just produced a regression model that indicates Americans are driving less far, and showing a related preference for cities not ruled by car culture:

Between October 2004, when gas prices first hit two dollars a gallon, and December 2008, when they fell below this threshold, three cities with among the largest declines in housing prices were Las Vegas (-37 percent), Detroit (-34 percent), and Phoenix (-15 percent), each highly car-dependent cities. Conversely, the two markets with the largest gains in housing prices were Portland, Oregon (+19 percent), and Seattle (+18 percent), communities that are more friendly to alternate modes of transportation.

Mind you, the US public still has some way to go, in other than a motoring sense. Americans drove a collective 222 billion miles during January 2009 —roughly enough to make eight hundred round-trips to Mars.

That translates to every man, woman, and child in the US traveling by road the equivalent of Wellington to Hamilton and back again during that month alone. But even so, that was less than previously. As Silver says, January 2009 was the fifteenth consecutive month in which the average American drove less distance than he had a year earlier.

The test of the recession’s bite on US car culture will come in a month or so, when lower gas prices will co-incide with those endless, restless summer days and nights. Yet the fact that house prices are risjng in cities with good public transport systems – and falling in those without them – is a hopeful sign.